scholarly journals Futures Price and Trading Volume: Evidence From Malaysia

2020 ◽  
Author(s):  
Bakri Abdul Karim ◽  
Zulkefly Abdul Karim
Keyword(s):  
Trading Volume ◽  
Stock Index ◽  
Spot Price ◽  
Stock Index Futures ◽  
Index Futures ◽  
Spot Prices ◽  
Long Run ◽  
Causality Tests ◽  
Short Run ◽  
Futures Price

This paper examines the long- and short-run dynamic causality between the futures price and trading volume in the Malaysian equity market. The data of futures price, trading volume and spot price are in daily frequency, spanning from 2006 to 2009. By using ARDL cointegration and VECM causality tests, the findings revealed the existence of long-run relationship between futures price, volume and spot prices. In addition, there exists a short-run bidirectional causality relationship running between futures return-trading volume and futures return-spot return. Thus, the stock index futures market in Malaysia is not informational efficient.  

Price Discovery across the Stock Index Futures and the ETF Markets: Intra-Day Evidence from the S&P 500, Nasdaq-100 and DJIA Indices

2007 ◽  
Vol 10 (02) ◽  
pp. 215-236 ◽  
Author(s):  
Mei-Maun Hseu ◽  
Huimin Chung ◽  
Erh-Yin Sun
Keyword(s):  
Relative Price ◽  
Stock Index ◽  
Stock Index Futures ◽  
Price Leadership ◽  
Index Futures ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Macroeconomic Fundamentals ◽  
Before And After ◽  
Short Run

This paper investigates the intra-day price dynamics of the S&P 500, Nasdaq-100 and DJIA indices for the periods both before and after the Nasdaq market crash which occurred between March 2000 and March 2001. We explore the relative price efficiencies of the three indices in the spot, futures, E-mini futures and ETF markets, and find that a cointegrating relationship existed between the three indices during the period after the crash. This would seem to imply that in the aftermath of the crash, the three indices shared common macroeconomic fundamentals. We find that where there is some disturbance in the equilibrium relationship between the indices, the market which adjusts to retain equilibrium is the Nasdaq-100 market. In the long run, the S&P 500 index leads the other index contracts, a finding which is consistent with the trading cost hypothesis. Nevertheless, the Nasdaq-100 index retains short-run price leadership over both the S&P 500 and DJIA indices.

THE EFFECTS OF PRICE DYNAMICS ON OPTIMAL FUTURES HEDGING

2012 ◽  
Vol 07 (02) ◽  
pp. 1250008 ◽  
Author(s):  
DONALD LIEN ◽  
KESHAB SHRESTHA
Keyword(s):  
Stock Index ◽  
Futures Contracts ◽  
Stock Index Futures ◽  
Performance Impact ◽  
Hedge Ratio ◽  
Index Futures ◽  
Futures Hedging ◽  
Long Run ◽  
Short Run ◽  
Optimal Hedge

In this paper, we analytically derive the adjustments needed for the conventional hedge ratio due to the presence of short-run and long-run dynamics. We also analytically show the performance impact of these dynamics. We apply the method discussed in the paper to eight different stock index futures contracts from seven different countries. It is found that the short-run dynamics has no effect whereas the long-run dynamics may produce significant effects on the optimal hedge ratio and the hedging performance.

Cross-Market Linkages of Taiwan Index Futures Contracts Listed on the Taiwan Futures Exchange and the Singapore Exchange

2007 ◽  
Vol 10 (04) ◽  
pp. 561-583 ◽  
Author(s):  
Hung-Gay Fung ◽  
Qingfeng "Wilson" Liu ◽  
Gyoungsin "Daniel" Park
Keyword(s):  
Stock Exchange ◽  
Trading Strategies ◽  
Stock Index ◽  
Futures Contracts ◽  
Stock Index Futures ◽  
Index Futures ◽  
Taiwan Stock Exchange ◽  
Market Linkages ◽  
Cointegration Tests ◽  
Causality Tests

Cointegration tests and ex ante trading rules are applied to study cross-market linkages between the Taiwan Index futures contracts listed on the Singapore Exchange and the Taiwan Stock Exchange Capitalization-weighted Stock Index futures contracts listed on the Taiwan Futures Exchange. The exchange rate-adjusted returns of the two futures series do not differ significantly in mean but in variances, and show significant mean-reverting tendencies between them. Our trading strategies are able to generate statistically significant, if economically insignificant, profits, while our Granger causality tests demonstrate that information flows primarily from the Singapore market to the Taiwan market, a result confirming other research.

The Effect of Futures Trading on Spot Market Liquidity

2005 ◽  
Vol 13 (1) ◽  
pp. 29-52
Author(s):  
Ki Yool Ohk
Keyword(s):  
Price Volatility ◽  
Spot Market ◽  
Market Liquidity ◽  
Stock Index ◽  
Spot Price ◽  
Spot Markets ◽  
Stock Index Futures ◽  
Trading Activity ◽  
Futures Trading ◽  
Index Futures

This study analyzes the effect of stock index futures trading on the price volatility and liquidity of spot markets, It is found that spot price volatility increases significantly after stock index futures are listed, This study partitions the trading activity series of sPOt markets into expected and unexpected components, and documents that unexpected spot-trading activities are associated with smaller sPOt price movements subsequent to the introduction of futures trading, This imolies that spot market liquidity has been increased by the intraduction of futures trading, Furthermore, this study examines the effect of futures-trading activity on the liquidity of spot markets, Results show that active futures markets enhance the liquidity of soot markets.

An Application of Threshold Cointegration to Taiwan Stock Index Futures and Spot Markets

2003 ◽  
Vol 06 (03) ◽  
pp. 291-304 ◽  
Author(s):  
Ching-Chung Lin ◽  
Shen-Yuan Chen ◽  
Dar-Yeh Hwang
Keyword(s):  
Transaction Costs ◽  
Stock Index ◽  
Spot Markets ◽  
Stock Index Futures ◽  
Threshold Cointegration ◽  
Index Futures ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Intraday Data ◽  
Arbitrage Opportunity

This paper examines the arbitrage opportunity existing between Taiwan stock index futures and spot markets with the consideration of transaction costs. Index-futures arbitrageurs only enter into the market if the deviation from the equilibrium relationship is sufficiently large to compensate for transaction costs, as well as risk and price premiums. Employing the 5-minute intraday data of Taiwan index futures contracts, this paper uses the threshold cointegration model to estimate the upper and lower thresholds within which arbitrage is not profitable and, hence, the mispricing errors do not adjust back to equilibrium in the central regime. Combining these thresholds with an error correction model (ECM), empirical results show that there exists bi-directional Granger–causality relationship between index futures and spot markets. However, once the long-run cointegrated equilibrium does not hold, re-establishment of the equilibrium situation mostly depends on price adjustment in the futures market.

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